Lulus Company operates a chain of sandwich shops (Click the icon to view additional information.) (Click the icon to view Present Value of $1 table.) 0 0 (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. 0 (Click the icon to view Future Value of $1 table.) 0 (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. = Calculate the payback for both plans. (Round your answers to one decimal place, X.X.) Amount invested 1 Expected annual net cash inflow Plan A 5 8,400,000 IS ,525,000 Plan B 8,240,000 1,000,000 Payback 5.5 years 8.2 years Calculate the ARR (accounting rate of return) for both plans. (Round your answers to the nearest tenth percent, X.X%.) ARR Plan A Plan B A Requirements - X 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans. 2. What are the strengths and weaknesses of these capital budgeting methods? 3. Which expansion plan should Lulus Company choose? Why? 4. Estimate Plan A's IRR. How does the IRR compare with the company's required rate of return? Print Done Reference 14% 0.877 1.647 2.322 2.914 3.433 15% 0.870 1.625 2 283 16% 0.862 1.605 18% 0.847 1.566 2.174 20% 0.833 1.528 2.106 4.486 too ini dio R 5.995 5.216 Periods! 1% 2% 3% 496 0.990 0.980 0.971 0.962 1.970 1.942 1.913 1.886 2.941 2.884 2.829 2.775 3.902 3.808 3.717 3.630 4.853 4.713 4.580 4.452 5.795 5.601 5.417 6.728 6.472 6.230 6.002 7.652 7.325 7.020 6.733 8.566 8.1627.786 7.435 9.471 8.983 8.530 8.111 10.368 9.787 9.253 8.760 11.255 10.575 9.954 9.385 12.134 11.343 10.635 9.986 13.004 12.106 11.296 | 10.563 13.865 12.849 11.938 11.118 14.718 13.578 12.561 11.652 15,562 14.292 13.166 12.166 16.398 14.992 13.754 12.659 17.226 15.678 14.324 13.134 18.046 13.590 18.857 17.011 15.415 14.029 19.660 17.658 15.937 14.451 20.456 18 292 16.444 14.857 21.243 18 914 16.936 15.247 25 22.023 19.523 17.413 15.622 N Present Value of Ordinary Annuity of $1 5 % 8% 7% 8% 9% 10% 0.952 0.943 0.035 0.926 0.917 0.909 1.859 1.8331.8081.7831.759 1.736 2.723 2.673 2.624 2.577 2.531 | 2.487 3.545 3.465 3.387 3.312 3.240 3.170 3.993 3.890 3.791 4.355 5.033 4868 5.535 5.335 5.759 7.722 6.418 6.145 8.305 6.805 8.863 7.161 9.304 7.487 9.899 7.785 7.367 10.380 9.108 8.061 7.606 10.838 10.105 9.447 8.851 8 313 7.824 11.274 10.4779.763 9.122 8.544 8.022 11.690 10.828 10.059 9.372 8.756 8.201 12.085 11.158 10.336 9.604 8.950 8.365 12.462 11.470 10.5949.818 9.129 8.514 12.821 11.764 10.836 10.017 9.292 8.649 13.163 12.042 11.061 10.201 9.442 8.772 13.489 12.303 11.272 10.371 9.5808.883 13.799 12.550 11.469 10.529 9.707 8.985 14.094 12783 11.654 10.675 9.8239.077 niini 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.459 7.562 7.645 7.718 7.784 7.843 oo oi 7.100 5843 9.712 co oo 6.002 6.142 6.265 6.373 6.467 6.550 6.623 6.312 6.743 6.359 6.792 6.399 6.835 6.434 6.8736.464 6.687 6.097 Print Done 0 Reference Future Value of $1 Periods 10% 14% 12% 1.120 1050 1080 1.140 1010 1020 1.124 1.210 1.254 7% 1.070 1.145 1.225 1.311 1.403 15% 1.150 1.323 1521 1.103 1.158 99 1.080 1.166 1.260 1.360 1.469 1.090 1.983 1205 1.412 1539 1331 1.300 1482 1.689 1.126 1216 1405 1.574 1.762 1.454 1.611 1.217 1.159 1.194 1230 1.255 1.772 1949 1.030 1.041 1.051 1.062 1.083 1.094 1.105 1.116 1.127 1.257 - 1.551 1.020 1040 1061 1.082 1.104 1.126 1.149 1.172 1.195 1.219 1.243 1268 1294 1319 1.346 1.373 1.400 1.428 1.457 1.620 1.316 1.369 1.423 1.480 1.539 1.601 1.665 1.732 1.305 1.344 1.384 1.426 1.469 1.513 1.558 1.605 1.653 1.138 1.710 1.796 1.886 1.980 ai nici nici 1.149 1.181 1.801 1.173 1.134 1.873 1.948 1.702 232 1.516 1.546 2.191 2.279 2.370 2465 1.245 1.257 1.860 1.916 1.974 2.033 2.094 1577 1.608 1.641 nu oo 1282 2.666 Print Done Reference - X | 10% 12 14% | 15% | 1.000 2.150 3.47 5567 Future Value of Ordinary Annuity of $1 | Peroes | % | 25 | | 4% | 5% | | | 1 1.000 | | 1000 | 1.00 | | 1000 | 1.000 | 1.000 | 1000 | 1.000 2.010 | 2.020 2030 20140 | 2.050 | 2.050 | 200 | 2080 3.030 | 3.000 20091 3122 3.158 | 3.134 |25| 3246 2.00 14.122 | 4.18 | 4.246 | 4.310 | 4.375 14.40 | 4.00 5.101 | 5.204 | 1539 | 546 3526 5.637 | 5.751 5.152 | 6.208 | 6.533 6.975 7.153 7.214 17.434 7862 738 8.234 8.55E 3.286 8.33 8.32 2.24 9.897 10.250 3.352 9.75 10.15 0.58 | 1.5 10.95 1.45 12.1 27 | 13.49 13.41 5.3 :weism 28883468 , B5%magm w mhmm =%BB aw MBED:PE E4% %% www4B , | 3197 68.00 45 | 2.50 1375 19: 30 34 25 28.35 3245 36.52 30.2 2.43 39.8 | 322 | 5.45 | | 1.65 | 7.54 104.5 88.50 | 182 158.7 18.2 4.0 8.35 | 1333 | 1813| 22.8 28 24 7.5 63.25 | 3.1 | Print Done More Info The company is considering two possible expansion plans. Plan A would open eight smaller shops at a cost of $8,400,000. Expected annual net cash inflows are $1,525,000 for 10 years, with zero residual value at the end of 10 years. Under Plan B, Lulus Company would open three larger shops at a cost of $8,240,000. This plan is expected to generate net cash inflows of $1,000,000 per year for 10 years, the estimated useful life of the properties. Estimated residual value for Plan B is $1,200,000. Lulus Company uses straight-line depreciation and requires an annual return of 8%. Print Done 0 Reference - | 0924 | 0.627 0.540 Present Value of $1 Periods 1% 12 13 14 15 16 17 18 gT10, 12, 114, 115, 116, 18, 108 0.990 | 0.980 | 0.971 | 0 962 | 0.952 10.043 | 0.935 | 0 925 | 0.917 | 0.909 | 0.893 | 0.877 | 0.870 | 0.862 | 0.847 OB33 0.980 0.951 | 0.043 | 0.925 | 0.907 | 0.890 | 0.873 | 0.857 | 0.842 | 0.826 | 0.797 | 0.769 | 0.756 | 0.743 | 0.718 0.60 0.971 0.042 | 0.915 | 0.88 | 0.854 | 0.840 | 0.816 | 0.704 0.772 | 0.751 | 0.712 | 0.675 | 0.658 | 0.641 | 0.609 0.579 0 951 OB8B 0.85 | 0.823 | 0.792 | 0.763 | 0.735 | 0.708 | 0.683 | 0.635 | 0.592 | 0.572 | 0.552 | 0.515 0 482 | 0.951 0.906 | 0.863 0.82 | 0.784 | 0.747 | 0.713 | 0.681 0.650 | 0.621 | 0.567 | 0.519 | 0.497 | 0.476 | 0.437 | 0402 0.705 | . 0.630 0.596 0.370 0.335 0.711 0.065 0.623 0.583 0.547 0.314 0 279 0.677 0.582 0.502 0.256 0.233 0.545 0.592 0544 0.500 0.460 0.351 | 0.253 0.225 0.104 0.558 | 0.508 | 0463 0.422 0.247 | 0.227 0.191 0.162 0.527 | 0.475 | 0429 0.388 0.162 0.135 0.497 | 0.444 0.397 0356 0.137 0.112 0.459 0.415 0.368 0.326 0.115 0.003 0.442 0.388 0.340 0 200 0.099 0.078 0.417 0.362 0.315 0.275 0.183 0.108 0.084 0.065 0.853 0.339 202 0.252 0.093 .071 0 054 0.844 0.371 0.317 0 270 0.231 0.080 0.000 0.045 0335 0.350 0.295 0.250 0.059 0.051 0.033 0.828 0.277 0.232 0.194 0.050 0.043 0.031 0.312 | 0.258 0215 0.178 .051 .037 0.025 0.811 0.359 | 0.294 | 0.242 | 0.199 0.154 0.135 | 0.003 0.053 0.044 O.C31 0.022 0.303 0.342 | 0.278 | 0.225 | 0.184 0.150 | 0.123 | 0.083 | | .056 0.038 | 0.025 .013 0.326 | | 0.252 | 0.211 | 0.170 0.138 | 0.112 | 0.074 | 0.049 0,040 0.033 0.022 0.015 0.788 0.390 0.310 | 0.247 | 0.197 | 0.158 0.126 | 0.102 | 0.006 | 0.043 | 0035 0.028 0.019 0.013 0.780 0.375 | 0.295 | 0.233 | 0.184 | 0.145 | 0.11 0.092 | 0.059 | 0.033 | 0.030 | 0.024 | 0.015 | 0.010 021- 0.331 0.820 .064 0.045 2.75 Print Done